why 80% of the worldwide populous live on $10 a day but the UK govt. have £13k out on loan for every man, woman child in said kingdom

Thanks for this…and yes I feared that was what the Cairncross theme would be. The Tobin Tax however is proposed as a

global tax….for global public goods. In other words, it maintains the global financial status, but drops ‘sand in the wheels’in the form of a

tax on international transactions…because it is a global tax (i.e. not destined for any one country) the development community has proposed that

proceeds be used to fund development/climate changte….Hope this helps. Ann

Sorry to be late in commenting here, but I’ve been prompted by last night’s (Monday 10th November) Radio 4 “Analysis” programme, in which

Frances Cairncross took the “oh, no, we’ve got a huge public debt, government spending must be slashed and public services will inevitably have to

suffer” line. My point is really that she simply asserted the need to cut the debt quickly (with only Polly Toynbee speaking against).

But

surely you are saying: (a) government debt is, historically, not particularly high, despite Cairncross’s assertions; and (b) even if it were,

cutting goverment spending is not the answer. I am simply wondering: if we, as a nation, fall for the cut-goverment-spending-at-all-costs line, as

looks increasingly likely, there is an alternative in tax increases, and a Tobin tax would be a strong candidate for that.

Dilnot et al.

Keynes argued that there was little point in using the deficit as a measure. The preferred measure, the one I have used

above is total debt as a share of GDP.

The reason for this is that both low levels of spending, and high levels of spending can result in a

small public sector deficit. The deficit does not distinguish between high or low levels of spending. I am told that all economists get this

wrong….

In fact in the pamphlet Tim quoted, Dilnot and others also question the usefulness of the deficit measure: see here:

“How

useful is the deficit as a measure of discretionary fiscal policy? One obvious problem concerns the economic cycle – even where there are no

discretionary changes in policy, an economic downturn will depress government receipts (as falling household and corporate incomes reduce the tax

base) and at the same time increase expenditures (notably, on unemployment-related social security benefits). Together these effects mean that the

onset of a downturn will produce a deficit under policies that would previously have achieved balance. Conversely, the onset of a boom can produce

a surplus on the basis of policies that previously produced balance.”

Ann

to all sorts of uncertainties, but as far as I am aware it is the best historical account – which is why the Treasury makes it available.

It would be very interesting to see series adjusted for the factors mentioned, could you provide one with appropriate sources? I would still

suspect that the post WWII point would be the highest ever, and that it was at that point that the Labour government began to build the NHS etc.

Ann

be up and benefit expenditure would be down.
From the start of the great depression right through to the 1970s, aggregate demand was raised by

both lower long-term rates of interest and higher government expenditure. The former led to higher rates of private fixed capital investment.

Government expenditure rose from figures of around 11% in the 1920s, after a gradual increase through the mid to late 1930 and then great increases

during the war, the rate stabilised at around 22% for much of the post-war era. Basically, the activity of government doubled. (The figures in this

paragraph exclude transfer payments such as pensions.)
Those who judge the ‘fiscal stance’ on the basis of the public finances simply betray

their misunderstanding of Keynes’s theory. The outcomes of this period wholly vindicate his reasoning. Government expenditure was increased

greatly, national income rose and the public finances improved. The public finances are not a measure of the extent of stimulus, they are a measure

of outcome.
Vital to the success of Keynes’s fiscal policies were his monetary policies. IN the 1930s, the spending was preceded and supported

by a general reduction in rates of interest across the spectrum. This involved a great extension in the use of short-term bills, and hence

additional savings on interest (because short bills carry lower interest than long). Later on, borrowing was financed by the creation of new money.

As Graham Turner has argued, this sequencing of monetary and fiscal policy was not a feature of the actions of the Japanese authorities.

Moreover a good deal of the expansion of the public sector balance sheet followed from the socialisation of private sector debts. In the 1930s,

Keynes considered that the way to restore asset values was to restore income.
Krugman is also mentioned. It is not clear to me how Krugman

derived his 40% figure, certainly it is not supported by the only recorded experience of a comparable recession.
But Krugman is a ‘Keynesian’

at best, and ignores the great part of Keynes’s analysis which was concerned with the operation of monetary economies. Hunter Lewis rightly argues

that Keynes’s monetary policies have been neglected, but so too have the monetary dimensions of his fiscal policies.

book on Keynes emphasizes this. I do think that central bank interest rates were too low in the 2000′s, not only in relation to inflation ( in the

US under inflation for three years) but importantly in relation to yield spreads.

1945, government debt, bond markets, sterling – and all that Ann Pettifor puts government debt in perspective on her Debtonation blog

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question? [...]

It did?

Actually, the post war Labour

Government was fiscally contractionary:

http://www.ifs.org.uk/bns/bn26.pdf

“The immediate aftermath of the Second World War saw the

steady closure over 1946 and 1947 of the huge wartime deficit, producing a few years of surplus as government expenditure was reined in by

demobilisation.”